Digi International Inc. (DGII) | Investment Case

1. Company Snapshot

1.a. Company Description

Digi International Inc.provides business and mission-critical Internet of Things (IoT) products, services, and solutions in the United States and internationally.The company operates in two segments, IoT Products & Services and IoT Solutions.

It offers cellular routers for mission-critical wireless connectivity; cellular modules to embed cellular communications abilities into the products to deploy and manage intelligent and secure cellular connected products; console servers to provide secure and remote access to network equipment in data centers and at edge locations; and radio frequency products, including embedded wireless modules, off-the-shelf gateways, modems, and adapters under the Digi XBee brand.The company provides embedded system products under the Digi Connect, ConnectCore, and Rabbit brands; and infrastructure management products, comprising of serial servers, which offers serial port-to-Ethernet integration of devices into wired Ethernet networks; and universal serial bus solutions.In addition, it offers Digi Remote Manager, a recurring revenue cloud-based service that provides a secure environment for customers to manage their connected device deployment; Digi Wireless Design Services; and SmartSense by Digi for monitoring wirelessly the temperature of food and other perishable or sensitive goods, monitor facilities or pharmacies by tracking the completion of operating tasks by employees, as well as quality control and incident management for food service, healthcare, and transportation/logistics industries.

Further, the company provides professional services, such as site planning, implementation management, application development, and customer training; data plan subscriptions; and enhanced technical support services.Digi International Inc.was incorporated in 1985 and is headquartered in Hopkins, Minnesota.

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1.b. Last Insights on DGII

Digi International Inc.'s recent performance was negatively driven by the company's lack of a significant earnings beat in Q1 2025, despite meeting earnings estimates. The absence of a notable earnings surprise, coupled with a lack of new product announcements, may have disappointed investors. Additionally, the company's recent focus on solving supply chain challenges through its VOYAGE solution may not have been enough to drive growth, potentially weighing on investor sentiment."

1.c. Company Highlights

Last Price	45.09
Change Percentage	3.16%
Open	43.69
Previous Close	43.71
Market Cap ( Millions)	1679
Volume	415064
Year High	45.64
Year Low	22.39
M A 50	38.09
M A 200	33.45

FCF Yield	6.43%
Dividend Yield	0.00%
ROE	6.65%
Debt / Equity	25.02%
Net Debt / EBIDTA	172.33%
Price To Book	2.63
Price Earnings Ratio	41.03
Price To FCF	15.55
Price To sales	3.9
EV / EBITDA	22.8

2. Digi International's Strong Fiscal 2025 Finish and Bullish Outlook

Digi International Inc. reported a robust conclusion to fiscal 2025, with record quarterly revenue reaching $114 million, a 9% year-over-year increase, and Annual Recurring Revenue (ARR) hitting a record $152 million, growing 31% year over year. For the full fiscal year, revenue was $430 million, up 1% year over year, and adjusted EBITDA was $108 million, an 11% increase. The company also generated $105 million in free cash flow and paid off all debt from the Ventas acquisition. Earnings per share (EPS) came in at $0.56, beating analyst estimates of $0.51.

Publication Date: Nov -24

                                    📋 Highlights
                                    Record Q4 Revenue & ARR Growth:
                                                $114M revenue (9% YoY), $152M ARR (31% YoY), driven by Jolt/SmartSense integration.
Full-Year Performance:
                                                $430M revenue (+1% YoY), $108M adjusted EBITDA (+11% YoY), $105M free cash flow post-Ventas debt payoff.
2026 Growth Targets:
                                                Double-digit ARR, revenue, and EBITDA growth, with $200M ARR/EBITDA goals by 2028.
Jolt Acquisition Impact:
                                                $20M+ ARR contribution, tracking $11M EBITDA run rate by 2026 end.
Product Segment Growth:
                                                Cellular routers to lead 2026 growth; OpenGear drives data center expansion (50% of business).

                                

Operational Highlights and Integration Progress

The integration of SmartSense and Jolt is progressing well, with the first cross-selling opportunities emerging. Digi's President and CEO, Ronald E. Konezny, stated that the company has a clear vision of the combined platform and has integrated the teams. The company is seeing a broad-based opportunity in connecting hundreds of billions of devices to the Internet and is participating in emerging and evolving technology trends such as artificial intelligence, edge computing, and industrial automation.

Growth Outlook and Guidance

For fiscal 2026, Digi expects double-digit growth for all three of its key metrics: ARR, revenue, and adjusted EBITDA. The company is confident in its long-term goal of reaching $200 million of ARR and $200 million adjusted EBITDA by the end of fiscal 2028. Acquisitions remain the top capital deployment priority, and the company is tracking a number of opportunities in the industrial IoT space.

Valuation and Metrics

With a P/E Ratio of 36.41 and an EV/EBITDA of 20.38, the market is pricing in significant growth expectations. The company's ROIC of 5.65% and ROE of 6.65% indicate a reasonable return on investment. Given the strong growth outlook and the company's confidence in reaching its long-term goals, the current valuation appears to be justified, but investors should monitor the company's ability to execute on its plans.

Segment Performance and Opportunities

The company is seeing strong growth in its P&S recurring revenue trends, with the attach rate increasing. The cellular router division is expected to grow the fastest on a percentage basis in 2026. Europe is a country-by-country opportunity for Digi, with 15-20% of revenue currently coming from the region, while North America is expected to grow faster.

3. NewsRoom

Digi International Achieves SOC 2 Compliance Demonstrating its Sustained Commitment to Security

Dec -02

Source: businesswire.com

3 Networking Stocks to Consider From a Thriving Industry

Nov -20

Source: zacks.com

DGII vs. CSCO: Which Stock Is the Better Value Option?

Nov -19

Source: zacks.com

Digi International: Improved Productivity And Higher Share Prices

Nov -19

Source: seekingalpha.com

Why Digi International Stock Crushed it With a 7% Gain Today

Nov -13

Source: fool.com

These Analysts Increase Their Forecasts On Digi International Following Better-Than-Expected Q4 Earnings

Nov -13

Source: benzinga.com

Digi International Inc. (DGII) Q4 2025 Earnings Call Transcript

Nov -13

Source: seekingalpha.com

Digi International (DGII) Beats Q4 Earnings and Revenue Estimates

Nov -12

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.89%)

6. Segments

Internet of Things Products & Services

Expected Growth: 1.8%

Digi International Inc.'s IoT products and services growth is driven by increasing demand for industrial automation, remote monitoring, and real-time data analytics. The proliferation of connected devices, advancements in 5G and edge computing, and growing need for efficient supply chain management also contribute to the 1.8% growth.

Internet of Things Solutions

Expected Growth: 2.2%

Digi International Inc.'s IoT solutions growth is driven by increasing demand for industrial automation, remote monitoring, and real-time data analytics. The proliferation of connected devices, advancements in 5G and edge computing, and growing need for efficient supply chain management also contribute to the 2.2% growth.

7. Detailed Products

IoT Devices

Digi International offers a range of IoT devices, including routers, gateways, and modules that enable secure, reliable, and scalable IoT connectivity.

Cellular Routers

Digi's cellular routers provide secure, reliable, and scalable wireless connectivity for a wide range of applications, including industrial automation, transportation, and smart cities.

Embedded Systems

Digi's embedded systems, including single-board computers and system-on-modules, provide a foundation for building custom IoT devices and applications.

Device Management

Digi's device management solutions provide remote monitoring, configuration, and management of IoT devices, ensuring optimal performance and security.

IoT Software

Digi's IoT software solutions provide a range of tools and platforms for building, deploying, and managing IoT applications.

Cellular Modems

Digi's cellular modems provide secure, reliable, and scalable wireless connectivity for a wide range of applications, including industrial automation, transportation, and smart cities.

Gateways

Digi's gateways provide secure, reliable, and scalable connectivity for IoT devices, enabling data transmission and processing.

8. Digi International Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Digi International Inc. faces moderate threat from substitutes due to the availability of alternative products and services in the market.

Bargaining Power Of Customers

Digi International Inc. has a high bargaining power of customers due to the presence of large and established customers in the industry.

Bargaining Power Of Suppliers

Digi International Inc. has a low bargaining power of suppliers due to the presence of multiple suppliers in the market.

Threat Of New Entrants

Digi International Inc. faces a moderate threat of new entrants due to the presence of barriers to entry and the need for significant investment in the industry.

Intensity Of Rivalry

Digi International Inc. operates in a highly competitive industry with many established players, leading to a high intensity of rivalry.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	27.36%
Debt Cost	3.95%
Equity Weight	72.64%
Equity Cost	10.03%
WACC	8.36%
Leverage	37.66%

11. Quality Control: Digi International Inc. passed 5 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Digi

A-Score: 5.2/10

Value: 3.3

Growth: 6.7

Quality: 7.8

Yield: 0.0

Momentum: 8.0

Volatility: 5.3

1-Year Total Return ->

NETGEAR

A-Score: 4.8/10

Value: 8.0

Growth: 4.2

Quality: 3.1

Yield: 0.0

Momentum: 9.0

Volatility: 4.3

1-Year Total Return ->

ADTRAN Holdings

A-Score: 4.1/10

Value: 5.7

Growth: 3.4

Quality: 2.4

Yield: 1.0

Momentum: 9.0

Volatility: 3.0

1-Year Total Return ->

Clearfield

A-Score: 3.3/10

Value: 2.4

Growth: 4.2

Quality: 4.5

Yield: 0.0

Momentum: 5.0

Volatility: 3.7

1-Year Total Return ->

Iteris

A-Score: 3.2/10

Value: 1.0

Growth: 7.0

Quality: 4.8

Yield: 0.0

Momentum: 5.0

Volatility: 1.3

1-Year Total Return ->

AmpliTech

A-Score: 2.9/10

Value: 7.4

Growth: 1.7

Quality: 3.2

Yield: 0.0

Momentum: 5.0

Volatility: 0.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

2.08%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

8.36%

Digi International Inc. - US2537981027

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on DGII

1.c. Company Highlights

Average Growth

Stable Momentum

Average Quality

Earnings Beats

Revenues Miss

Fairly Valued

Weak Momentum

Better Quality

Average Yield

Strong Momentum

Medium Volatility

Revenues Beats

2. Digi International's Strong Fiscal 2025 Finish and Bullish Outlook

Operational Highlights and Integration Progress

Growth Outlook and Guidance

Valuation and Metrics

Segment Performance and Opportunities

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.89%)

6. Segments

Internet of Things Products & Services

Expected Growth: 1.8%

Internet of Things Solutions

Expected Growth: 2.2%

7. Detailed Products

IoT Devices

Cellular Routers

Embedded Systems

Device Management

IoT Software

Cellular Modems

Gateways

8. Digi International Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Digi International Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

45.09$

Current Price

45.09$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA